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HMRC Are Getting Ready – Are You?

Investment by HMRC into their ‘Fraud Investigation Service’ increased to £204 million over the 2016/17 tax year, up from £186m in 2015/16, according to recent figures. This unit, which is made up of the specialist tax and criminal justice experts who deal with the most serious investigations, was set up in July 2015 as part of an internal restructuring by HMRC. The increase in investment suggests that HMRC could already be carrying out initial investigations into firms, ahead of the new laws coming into force.

The 30 September start date for the new offences corresponds with the date by which the first automatic exchanges of information under the Common Reporting Standard must take place. HMRC are already ploughing through data about accounts held by UK residents in the Crown dependencies (Jersey, Guernsey and the Isle of Man) and the Overseas Territories (including Gibraltar, Bermuda and the BVI), to see if any rules have been broken. By 30 September they will have information about accounts held in a raft of other overseas locations. Once they identify a tax evader they are likely to look back up the chain to see whether anyone has facilitated the evasion.

Tax evasion tends to be a longer-term course of conduct rather than a single act. This means that, although the new offences will only apply to conduct which takes place after the change in the law, scope for prosecution under the new rules may still exist even if a device for tax evasion was set up before that point, if the evasion is continuing to be facilitated.

Investigations into corporates will climb steeply after the new corporate offence becomes operational. Businesses must not wait for the new rules to take effect, but should begin preparing their prevention measures. The first a business might know about an investigation is when HMRC turn up in reception to execute a ‘raid’ or serve formal notices. Critical incident procedures should therefore also be reviewed now.